IT is not yet time for the sub-national governments to celebrate despite the minor uptick in their first half-year revenue report of 2021 just released by the National Bureau of Statistics. The NBS reports that the 36 states and the Federal Capital Territory grew their internally generated revenue to N849.12 billion. From the N398.25 billion recorded in the first quarter and the N450.86 billion in Q2, this is an increase of 13.21 percent. Although the coronavirus plague constrained economic activities in 2020, the marginal upward trend falls far short of expectations in many respects.
No doubt, 2021 has been better for the states. Records showed a 3.43 per cent decline in their 2020 IGR of N1.21 trillion from the N1.26 trillion they generated in 2019. Irrespective of this, the H1 2021 report shows predictability and unpredictability. Lagos State maintains its prime position. Oyo, Kaduna, Kano, and Rivers came up with some positive and negative surprises. Lagos generated N267.23 billion in the six months under review. Being Nigeria’s centre of commerce, it has consistently topped in the IGR table.
In its ‘State of the States, 2021 edition: Fiscal Options for Building Back Better,’ an NGO, BudgIT, reaffirmed that only Lagos, Rivers and Anambra could finance their operations from their IGR without the monthly federal allocations. From its usual spot behind Lagos, Rivers however fell to the third spot with N57.32 billion, displaced by the Federal Capital Territory, which made N69.07 billion. In 2020, Rivers was No.2 with N117.19 billion IGR. The FCT was third with N92.06 billion.
Kaduna retains its leadership over Kano, a noticeable trend in the past few years under its Governor, Nasir el-Rufai. He says Kaduna can now run its affairs without relying on the allocations from Abuja. Oyo State increased its intake by 26.4 per cent to N25.19 billion, though still far from its neighbour, Ogun, which raked in N74 billion in nine months.
With mandatory obligations suffocating them, all this is nothing to write home about, even for the top performers. The debt profiles of the sub-national governments rose by N472.63 billion (or 8.78 per cent) in 2019 to N5.86 trillion in 2020. It is a sign of the difficult fiscal environment. The foreign exchange volatility has weakened the purchasing power of these governments.
At 15.99 per cent, inflation beats the quarterly gain of 13.21 per cent that the states recorded in the H1 report. Yobe State recorded the lowest at N4.08 billion. The state is facing massive challenges, just like the other states in the North-East. A new World Bank report entitled, ‘The Lake Chad Regional Economic Memorandum: Development for Peace,’ says, “The region is characterised by high rates of poverty, low human capital, and poor access to key services. In the last three decades, economic activity and household incomes have been decreasing.” The report puts the poverty rate at 70 per cent in Yobe and 74 per cent in Adamawa State. The poverty rate of 70 percent in the North-East is double that of the regions in the South.
At their own peril, most still depend largely on the federal allocations for their obligations. This is naive primarily because of the global headwind from oil income, Nigeria’s main source of earnings. The population is growing at an annual rate of 2.6 per cent. Conversely, the national economy has witnessed two recessions in the past five years. Given the jobless rate of 33.3 per cent and non-implementation of the N30,000 monthly minimum wage by many states, Nigeria’s states remain in dire poverty straits.
But a problem that is known can be solved through conscious choices. Therefore, the governors need to implement radical economic policies. Most importantly, states should devise policies to wean themselves off the dependence on federal sharing. They should work around the compromised federal system, taking advantage of the partly liberalised solid minerals sector to enable them to become independent economic units. States that are rich in solid minerals should form partnerships with reputable international companies to take advantage of these resources. This is the formula in the United States, where a state like Nevada has developed unique economic plans despite being in a desert area. According to a data company, Statista, the Nevada State revenue from casino gaming peaked at $11.6 billion in the 2018 fiscal year.
In a federal political system, it is the combined sum from the federating units that enrich a country’s economy. With imaginative policies, California overtook New York State as the largest economy in the export of manufactured goods in 1965. At the advent of Silicon Valley in the 1970s, California became a global leader in the manufacture of electronics and computers. It did not wait for the US federal government. Currently, only a few industrialised countries overtake the state’s GDP of $3.01 trillion. If it were an independent country, it would be the fifth-largest economy globally, according to the World Bank. This is a valuable lesson for Nigeria’s complacent states.
Already, Kaduna State is defying the odds. According to el-Rufai, federal allocations account for 31 per cent of its revenue, but plans to depend wholly on its IGR “in the next few years” to service its operations. That is sound.
Infrastructure should occupy the front burner for the governors. States should concentrate on the construction of rural roads. This will empower the farmers, reverse the high rural-urban migration, and lift the farmers out of poverty, increasing their IGR. Every state should plug leakages and prune the cost of governance. The governors should take it upon themselves to lobby to have the constraining Railways Act 1955 repealed so that they can bring in international investors to develop modern rail systems in their domains.
Without improving their ease of doing business, the economy of the states might remain pedestrian. States should create open, innovative business-friendly environments to attract local and foreign investments; encourage private start-ups; improve rural road infrastructure; adopt cutting-edge technology in revenue collection and go after wealthy tax dodgers. Tourism is a veritable income earner, but the current insecurity siege constrains it. States can collaborate on regional lines to establish security outfits to tackle their peculiar security needs.
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